The Platform Group SE & Co. KGaA (TPG0) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us for our first results press conference. Let me start with thanking everyone who has worked on our business for the last 16 months and before, who actually made happen what I'm going to present you in the next minutes. Due to the acquisition yesterday, I assume there will be many questions. So I will rather speak quickly about the individual slides and open up for questions rather sooner, so you can ask all your questions and get the information you require. I will guide you through quick business updates, the financial update and then again hand over to the Q&A, and over to you, ultimately. The results have already been communicated. The 30% year-on-year growth are fully expected, and we delivered our promise with the IPO -- which we communicated in the IPO process. We exceeded our expectations from a profitability perspective, generated more cash flow than expected and acquired more customers than ever before and than expected. Obviously, all of those results are outputs. The inputs we delivered are obviously the selection, the customer experience and also benefiting from a strong market, confirming the ongoing switch to a more digital-driven market segment. As a result of the performance of 2020, we're happy to give you a quite stellar guidance between EUR 141 million and EUR 150 million in top line and EUR 5 million and EUR 6.9 million adjusted EBITDA. Those numbers already include the consolidation of the acquisition from yesterday, but only the consolidated -- consolidation -- consolidating starting on July 1 after the closing of the transaction. Before we go more into the details, just some quick highlights. We were able to grow our visits by almost 50%. We remained at a very high mobile traffic share, which also converts a significant portion, about 75% of our revenues. We delivered more than 600,000 orders to customers. And we did that at a very high customer rating level of 4.8 or 5 points in Trustpilot. Internally, the developments are ongoing. We remain a very female-focused company. Most of our customers are females, but also most of our employees are females. And we have started to develop our own brands especially focused on jewelry. The net revenue delivered -- was driven by both our core market in DACH with 25% growth, but also in the new markets outside of the DACH region with 72% growth. Ultimately, as you know, from the IPO process and the conversations we had over the last months and weeks, we are very focused on generating more new customers, which ultimately drives constantly growing order value per life cycle group. We achieved a 63% new customer growth, but we're also able to increase our active customers to almost 50%. Our strategic positioning as a premium and luxury fashion accessory retailer has started with a focus on handbags. And obviously, the initial customers all purchased handbags. It was the only selection we developed initially. Over the last 24 months, mainly, we expanded our selection rapidly across all categories with watches and jewelry, small leather goods, like wallets and belts, sunglasses and also shoes. And based on the market study that shows -- that is shown on the presentation here, you can see that customers are naturally interested in those categories and will ultimately lead to a higher average order value per annum per customer over time. So a clear confirmation of our strategic positioning. We've shown you before the categories that we're active in, in general, fashion accessories, led by our core category, handbags. But you can see on this slide that the new added selection over the past years is constantly developing more revenue to our overall results. Watches & Jewelry, as an example, with 3 digits in growth. Small leather goods with belts in 3 digits, and even wallets are still growing 100% year-on-year. Overall, the input for this growth is clearly the selection and brand expansion we've executed over the last 18 months. SKUs were growing to about 60%, and the new brands listed year-on-year have grown about 40%. Overall, we are continuing to focus on our positioning of an approachable premium and luxury retailer, which is a clear defined target group and a very wide audience we are attracting. Our mission, again, remains focused on every woman and making those products available that women want. The penetration is the core of the development in the next years. What does this mean? The market segment is still fully underpenetrated with only 12% online penetration in 2019. And with the latest numbers provided in the study here, we can see that the expectation is set to 30% in online penetration for the next -- in the next 3 years. The majority of the growth will be driven by generation Y and Z. So the younger generation within the -- which are active in the market segment. And obviously, those are not only online customers, those are mobile customers, which again reflects our strategy of becoming -- or being a mobile-first company. This slide just has changed visually, but the inputs remain absolutely the same. The growth pillars we focus on are threefold: first, selection expansion in existing categories like I discussed before, but also the addition of new categories for this year focused on beauty. The regional expansion in existing countries, for example, The Netherlands, but also in new countries like Belgium. And thirdly, the investments in our technology platform and in content, which makes our platform unique and more approachable to end users. Underlying -- obviously, we will drive growth also inorganically, which I'll come to later with the acquisition announced yesterday night. Just a brief touch on ESG. Obviously, ESG for us is a daily project. We are now just continuing on this on a quarterly basis. We continue to focus on making our company a better company. And for an example, focus on -- ensuring our footprint in the environment gets better over time. We only use fully reusable packaging. We continuously decrease our return rate through customer experience. We offset more than 250 tons of CO2 emission. And we support our employees with eco-friendly transport opportunities. Again, from a social perspective, we are very focused on fair opportunities for everyone, follow our ethical guidance -- guidelines that we've developed. And again, from a governmental perspective, we introduced a Code of Conduct, appointed compliance officers and focused on developing to an even better company than we are every single day. Jumping to the financials. Total net revenue, obviously, was mainly driven by the increase of our selection, which ultimately lead to a higher growth of orders than revenue with a small decline in average order value, which is again driven mainly by the category mix. We delivered more than 600,000 orders to our customers. And we're successfully reducing our return rate by almost 300 basis points year-on-year. The return rate you see on this slide compared to the ESG slide is different because, on this slide, we focus on the financial returns, so the value. On the ESG slide, we focus on the quantity of orders that were returned, which ultimately lead to the emission cost by it. On the right-hand side, you see the 15% decline in average order value, again, driven by the mix of categories, with categories like sunglasses, watches and jewelry and small leather goods realizing a slightly lower average order value, which ultimately leads to a small decline, but remains at an extremely high, very profitable level for us. We continue to invest in marketing, but we are able to achieve a significantly higher efficiency last year with 10 basis points less marketing cost ratio, which ultimately led to a customer acquisition cost of only EUR 37. Again, with the IPO proceeds, we will remain focused on growing our platform, but especially focused on growing our customer base which, for '21, will lead to a higher cost ratio and the results and EBITDA, I will present later with the guidance in a little bit more depth. Just a quick overview of the income statement. You see that our gross margin remains strongly on a 40% level. The product category mix, with focused categories of growth being sunglasses, watches and jewelry, see more pressure from the market environment. Therefore, there's a small hit on gross margin impact. Over the midterm, we are very, very confident to remain solidly above 40% in our gross margin. The order growth obviously also led to small increases in our distribution cost ratio, which includes all operational costs, so logistics, shipments, returns, everything and also the financial transaction costs of the payment terms. The change in other operating income is a technical change or an accounting change because we are preparing the change to IFRS accounting and already moved dunning charges up from other operating income into the revenues as IFRS will require it. Year-over-year, with the extremely positive growth, we are more than happy to deliver 9.4% EBITDA margin and fully exceeded our targets with those results. As reported before, we will remain profitable at any point in time for a full year basis. This is the clear focus of our company. The adjustments you see in '21, we are mainly focused -- basically almost focused on the IPO-related costs. Just about EUR 300,000 are nonrecurring costs, so mainly advise -- external advise cost. The amortization, as documented here, is mainly driven by an accounting policy, which will also be changed with the change to IFRS, which we are targeting for the end of this year. With the growth, at the same time, we were able to improve or increase the efficiency of our balance sheet and ultimately leading to a trade working capital ratio of only 23%, a significant improvement year-over-year. And obviously, as mentioned before, at the same time, we delivered a positive free cash flow and a very high cash conversion, while growing the company by 30%. Our net cash position before the acquisition obviously is extremely positive, putting us in a very good position to, a, organically, but b, also inorganically build a much larger base for our business. The EUR 4.6 million free cash flow, basically no FX effect ultimately led to a cash position, including the IPO proceeds of almost EUR 32 million at the end of the year '20. Yesterday night, we announced the successful acquisition of Brandfield. Brandfield is a company we've known for about a year. Has been in constant conversations with the management team and the founder of the company, understanding the huge synergy potential. We finally came to an agreement last night to take on 100% of the existing shares of 2 holding companies. Why 2 holding companies? The company, as you see on this slide, achieved about 40% of its revenues with own brands. Those own brands are managed -- or the rights of those own brands are held in a different holding company, but sold on the operational units of Brandfield. So customer facing, the main revenue comes from the Brandfield international websites, which we expect for the full year '21, the business year of Brandfield right now ends in June of this year with EUR 40 million in sales and about EUR 2.8 million EBITDA. The company generates about 75% of its revenues in the Netherlands and Belgium. The product selection is fully complementary with ours, rather focused on jewelry and watches, with huge opportunities from a leather goods segment, which is our core category. And the revenue base is mainly driven by an extremely high growth of orders, about 450,000 orders, delivered by the trailing 12 months during this year at an average order value of over EUR 80. The closing is expected for July 1, and only one closing action is to be delivered. So there's a little risk there we need to manage. With that, I want to go to the last slide, presenting you the guidance. Because of the consolidation of the acquired asset from yesterday, we will only reflect 6 months of the 12 months calendar year in our financials. Those you can see on the right-hand side in the consolidated guidance of EUR 141 million to EUR 150 million net revenue and EUR 5.0 million to EUR 6.9 million adjusted EBITDA. The pro-forma for the full calendar year would -- guidance would be EUR 160 million to EUR 170 million at EUR 6.0 million to EUR 8.1 million EBITDA. So again, just a confirmation of the communications we've been having focused on profitable growth remains 100%, set and clear for the future. And with that, I would hand over to you. Excuse me, for the fast talking, but I want to make sure we have enough time for the Q&A now and providing all the inputs you require. Thank you very much.

[Operator Instructions] And the first question is from Christian Salis, Hauck & Aufhauser.

Congrats again to the successful acquisition. So I've got 3 questions, please. So first, on the deal structure, could you maybe please provide more color on the deal structure, i.e., are there any earn-out components? And also how did you manage really to achieve this really attractive multiple of only 0.5x sales, I think, in 2021? And then secondly, could you please provide more color on Brandfield? So for example, how it is possible that they are generating already a 7% EBITDA margin despite their relatively small size? And secondly, where do you see synergies? And where do you see Brandfield's profitability in the midterm? And then finally, could you maybe please talk about the current trading in Q1? So how did Fashionette start into the year?

Thank you, Christian. I think that was 4 questions. So you might help me with the third and fourth question. I'll start with the deal structure. As communicated in yesterday's press release, we structured the deal with a downpayment and an earn-out component. The multiple referred to, I don't comment on. But what I can tell you is that we realized -- or we stick 100% to the guidance we provided in the prospectus, which was clearly set at about 45% to 50% of the IPO proceeds to be used for M&A, and the deal is fully in line with the guidance we provided in the prospectus. The second question was around Brandfield and the profitability achieving. As mentioned before, the company is very focused on also developing private label or owned brands. The revenue share of their own brands already is close to 40% or is expected to be 40% for the fiscal year '21, and those ultimately lead to extremely high profitability. The third question I noted was around synergies. Obviously, there's 2 main synergies. First of all, from our side to Brandfield, I expect us to deliver a completely different IT and BI structure to the company, ultimately enabling them to do their business even better than they're already doing today. Secondly, mainly from Brandfield to Fashionette, the competence that the team has developed, especially in developing and growing own brands is significantly better than we've been able to do in the last months. So we expect to see a significant upside from an increase of private label on a group level. And your fourth question, I noted, was Q1 development. We will release results soon, but I can just confirm what I said before, the growth of Q1 is exceeding the growth of full year '20. And April is confirming the growth we communicated as the guidance on the pages before.

The next question is from [indiscernible] RaboResearch.

Also, first of all, a quick question on Brandfield. So how should I view this? Are you going to basically bring your product range completely on the Brandfield side as well? And particularly their jewelry range on your side? And how will you handle logistics? Well, I guess, we've -- - they've mentioned Netherlands focus, there might be a case for a joint warehouse, so any thoughts on that already? And then a bit nitty-gritty on your return rate improvement. Well, is there also an improvement if we only look at the handbag category in 2020? Or was there a meaningful mix component of, say, a lower share of size of specific products or anything like that?

Okay. First question I noted was around selection. The expectation is to continue to invest in both fronts in the core markets of each individual brands. So for us, the DACH region and for Brandfield, in the region, let's call it, Benelux, so mainly focused on Netherlands and Belgium. And obviously, we will share synergies and selection is one of the synergies. I'm 100% certain there will not be a 100% overlap of the selection for multiple reasons. Fashionette as a brand is positioned higher than Brandfield is today. So the luxury focus will remain clearly set for Fashionette and not for Brandfield. Nevertheless, there are significant opportunities in the premium segment, where both companies have their strengths in individual categories, watches and jewelry, but also leather goods on the Brandfield side and broader fashion accessories on our side. So there will be enough synergies shared, which I will present in the future. The second question I noted was around logistics. Currently, Brandfield is operating its own logistics warehouse. We expect to continue the -- running the warehouse as is today. The main reason there is in the Netherlands, it's very common to ship products 7 days a week with a very fast delivery time. And the team in the Netherlands have developed very stellar processes that we are very excited about. So absolutely no reason to -- for any changes there. However, we always dive into the details of our operations. And with the switch to our warehouse in Oberhausen, there's obviously a very close proximity to the Netherlands. So we constantly review that. But for the moment, 100% committed to the existing operations. Certainly, the category mix is always basically -- or the return rate that was the question. The return rate is always looked at twofold. First of all, product category mix, which you referred to, but also country mix is very important. We, as Germans, are the worst return rates -- customers in the world, I believe, here. I've never seen something higher than Germans. And with the increase of our international revenue share, we constantly will optimize our return rate. But I can also tell you that the return rate for handbags declined year-on-year. And so by the way, it declined -- the return rate declines for shoes, it declined for small letter goods. It declined for every single category.

The next question is from Klaus [Runhau, Plateau].

Number one is, while I complement you on the acquisition, Brandfield, it appears -- if I made my calculations correctly, Brandfield appears to be a bit weaker concerning the margins with 7.0% than your own business, which had a margin of more than 9% last year. Now do you see the potential to lift up Brandfield margins? Or is it going to drag down your margins? And the second question would be on the expansion costs, which you do have to make, which are understandable, but if I look at your outlook then -- and if I take the midpoint of each EBITDA and sales forecast, then your margin is going to be much lower in 2021 than it was in 2020. I calculate around 4.1%, which is not exactly what I was hoping for. And the third question would be on the net result and the EPS. I think in the past, you told us that the costs for the IPO were bringing down the EPS in 2020. Maybe you can elaborate a little bit on that. And what the outlook is for '21? And the final question, number 4, is on more acquisitions to come? And I'll leave it at that. Thank you very much.

Okay. First question around the value accretive or not value accretive EBITDA. First of all, the company has grown extremely well, right? So the growth was over or is expected to be over 40% for the last business year. Second of all, the basis is significantly lower than ours, right, EUR 40 million versus roughly EUR 95 million. And thirdly, obviously, the synergies we share, we expect to be -- to have a significant positive impact in the midterm. But I'm not worried about short-term margin optimization. And that also goes into your second question, which I would then not answer individually, but combined. If you look at the market segment and the online penetration, and this has always made -- been made very clear. It's about a market taking opportunity with the extreme shift of the online penetration expected to end up at 30% by '25. So short-term margin optimization would be a risk to the value we are creating for shareholders and all stakeholders involved. For us, the clear focus remains to be profitable at any point in time for -- on a full year basis, but make sure we are acquiring as many customers as positive -- as possible in a positive way, which means we want to be positive on our customer acquisition in the first year of existing -- of a customer. So I don't expect Brandfield to be margin diluting in the long term. The third question I noted down was about acquisitions. We've always made it clear that M&A is a part of our strategy, and it will remain a part of our strategy. I always made it clear that I'm not talking to only one company. We've been very actively involved in many conversations in Europe, so outside of DACH. And I expect to deliver M&A constantly, not only just once.

There is one question missing, and that's about the EPS for 2020, which was marked down probably by the IPO costs and the outlook for 2021?

So I don't have the EPS on top of my head. I will get back to you on this one. The net profit for the company was EUR 1 million in -- which you will see in the annual results in '21. So I just haven't calculated the EPS yet, I'm sorry.

Yes. The net profit was EUR 1 million for 2020?

Yes.

Okay. And for 2021, do you have any outlook? Do you think -- do you know where it's going to go to?

We have not communicated guidance on that.

The next question is from Russell Pointon, Edison.

Daniel, I have a number of questions, please. Going back to this margin of about 4% on the acquisition. Could you just talk about where the cost pressures are, because I guess that's where the pressure is? And would you expect a quick rebound thereafter? Second, could you just talk about -- I mean, in terms of making the acquisition, a big question is either do this or focus more on expanding your core business in markets quicker. So could you just talk about how you made that decision? And therefore, could we -- following on from that, could we expect to see similar acquisitions in other markets, which take you into slightly different products? And aligned with that question is how appealing is such a high level of own brands because it's a very different product mix versus your -- what I consider the core business?

So regarding the margin, obviously, e-commerce is a scale game, right? As large a company gets, as more you will see economies of scale play into the margin, right? With the expected growth that we are going to deliver together with the Brandfield team and also shared competencies. Look at our IT platform, look at our BI platform that we've built, we clearly see significant opportunities to improve margin going forward. So cost pressure, I would not call it, a company at EUR 40 million delivers a mid-EBITDA profitability already. There's not too many companies out there who are that successful. So I am very proud of the team. It's not my team yet, but I know that the management team is very proud of its team. And -- can you still hear me? Sorry, just my webpage dropped. Okay. Sorry for that.

So just go back on that. In order for the margins to come down this year, there must be incremental cost versus what the business already has. So what I'm trying to get -- I'm trying to get a feel for what is increasing? And because -- I mean, traditionally, in adjusted EBITDA, you've taken nonrecurring costs below the line effectively. So I mean, I'm guessing restructuring charges, that kind of thing, they will be lower down, taken before your adjusted EBITDA? So which line items of the P&L are increasing at a greater rate than sales for the acquisition?

So multiple questions. The adjustments, obviously, are nonrecurring, right? That's -- we set a guidance regarding adjustments in the annual report. You can look them up. For us, it's -- as we said, you said restructuring, for me, it's more acquisition cost, right? So the advice we received from a legal tax, et cetera, perspective, we definitely will invest in the growth of the platform, which means we will also increase the investments on our IT team to help grow our platform at all, but mainly also stimulate the short-term conversion to our platform of Brandfield. That's not only on the web shop, but also on the back end and mainly on the BI side of the technology business. And obviously, we will also invest in customer experience, but also customer acquisition. Customer acquisition remains our clear target. And therefore, we are not optimizing for short-term profit maximization, always remain profitable at any point in time for a full year, but we are not optimizing for the short-term profit in a market-taking scenario as we're in today. And the second question, Russell, you would have to remind me on, please.

It's -- I mean, when a company decides to undertake M&A, there's a decision as to whether you do something which is slightly different, which appears slightly different versus actually just going harder and faster on your core business, which you've got lots of countries where you have ambitions to grow relatively quickly and increase your penetration. So can you talk about that trade-off?

Yes. Look, when you talk core business, right, you have to understand about, I would say, 3 years ago, right, the revenue share in not DACH, but Germany was significantly higher, fairly close to 100%. And the revenue share of handbags 3 years ago was significantly higher, much closer to 100% from handbags. And we're converting our existing brand and adding more competence along the whole value chain with the acquisition. So I don't see this as a hard switch. I see this as a development of the evolution that we've managed over the past months. Regarding the acquisition, we will remain focused on fashion accessories. That's what we know. That's what we can do. We are also looking at adjacent categories. As I already communicated, for this year, the focus clearly is on beauty. We are actively working on beauty, the beauty launch for this year organically, but I never rule out an acquisition in this field at any point in time, so this remains open.

Okay. And finally, it was just the -- it has a much higher percentage of owned brands. So could you just talk about how appealing that is? And could you -- if you bought other companies in other countries, whether that penetration of own brands is appealing?

Yes. So look, the success of our platform is fully based on strong partnerships with the industry, which have evolved over time. The growth is realized by our team, but also our partners, the combination of both, so we will remain 100% focused on that. But the opportunity of developing own brands, we have already started with watches and jewelry -- with jewelry in our own hands. But there will be opportunities from a margin perspective in all categories, but mainly the categories outside of handbags.

And the next question is from [ Werner Friedmann, AS&I. ]

Actually, I only have one question, It's on customer acquisition costs. Why not?

I think you have a delay because you're probably listening to the audio cast as well. So just please go ahead.

I'm going ahead then. It's on customer acquisition cost. I only had a short glimpse on the development you showed, and it seems to me that especially in the second half, the customer acquisition costs have been very low. Maybe you could comment on the reasons for that? And I also believe I've seen that the numbers differ for the previous years, differ from the numbers I have had so far?

Okay. I would have to look at the numbers again. I, obviously, double checked all the data. So I'm not 100% sure. Obviously, we need to double check and come back to you. Maybe you can also reach out to me and I will check the numbers you have at your hand. Just quickly talking about full year '20. Obviously, the second half year is always more efficient from a marketing efficiency perspective than the first half year because especially conversion during the holiday season is significantly higher. But there is no direct correlation of marketing investments and revenues, the investments our strategic investments and we'll pay it back over time. If you wish, I'm very proud of the results, but ultimately, we should have invested more, which we just didn't decide to do last year, but also see this as an opportunity going forward.

And what's the focus of your marketing strategy?

The focus remains on -- so do you mean by a channel perspective? Or can you specify the question, please?

Yes, it's on channel. That's why.

Yes. So the channels remain fully diverse as they are today. We are fully committed on the digital channels we are already utilizing, including social media, Google, Facebook, Instagram, all the channels you know, but we also remain fully committed to more traditional channels, TV in this example, which we also utilized, not only in the core region, DACH, but started to run TV campaigns in November last year also in the Netherlands. Again, for us, TV is not a traditional offline channel because the data transparency we can achieve is very high, very comparable to digital channels today. So for us, just another channel that we manage very, very data-driven and therefore, very efficiency -- very efficient, sorry.

And if you do the TV, which age cohort are you looking for there?

Women between 18 and 40.

Would these women look at TV?

Not 100% of the women, but the results show that enough women do watch TV. And if you talk about TV, don't look at your TV. The advertisement also runs on the streaming platforms of the TV channels. So don't only look at your TV and think about linear TV. It's also been digitalized meanwhile, and there's multiple ways of TV advertisement, not only in linear TV.

Okay. Maybe I had another question on -- it's also on the EBITDA margin. I fully understand you're going for growth for the next years. On the other hand, I see now your EBITDA margin has been already 9% last year. Do you have something in mind as a target margin once your very strong growth perspective would run out of steam?

I mean, the question is when it will run out of steam with a market that today is only 12% penetrated with online revenues, right? So do you believe that 30% online penetration means a saturated market segment? I don't. But we have achieved more than 9% EBITDA in the last 2 years. So obviously, the long-term outlook is significantly north of 10% in the double-digit EBITDA range. No doubt about it.

And there are currently no further questions. [Operator Instructions] And we do have a follow-up from Russell Pointon, Edison.

Sorry, it's me again. So just in terms of the other operating expenses. I know costs move around year-to-year, advertising, distribution, that kind of thing. But the loss on receivables edged up a bit. It was probably an incremental cost to margin of, I think, about 50 basis points in the year. Could you just talk about what drove that? And is it a number which you expect to drift up over time as the business expands?

Sorry, the connection was bad on my side. It was something on receivables, but the other half, I haven't understood.

Yes, your loss on receivables. I know the expense -- within other operating expenses, costs do move around a bit. But it increased by about 50 basis points of margin versus 2019. Is that a good thing or a bad thing? Is it something you expect to drift up as the business expands?

No, definitely not. So the main impact on -- clearly on other operating income, the gap that you see in the statement that I provided is close to 100% driven by the dunning charges just be removed out of it. The change in loss of receivables is just current business development, but nothing to worry about at all.

And the next question is from [indiscernible].

Just a couple of questions on the working capital side. So first, are you using factoring or reverse factoring? And given the acquisition with the higher share of own brands being sold, is there a change to be expected in the working capital ratio and the reduction in -- then the reduction in return rate, how much of that is connected to the COVID? The facts that I've heard from several other e-commerce players, that return rates have been much lower due to Corona, whereas you might be expecting some sort of normalization in 2021. And then you -- I think you mentioned that the shift in return rate mainly comes from the product mix rather than the actual -- the country mix rather than the actual reduction in categories. Is that correct?

Okay. Let me just clarify your last question first. What I said is when you look at return rate, there's 2 impacts: category mix and country mix from a bigger scale. All of our categories, every single category reduced its return rate significantly. On top of that, we saw a small impact from country mix. But the operational efficiency driven by a higher customer experience, we launched a couple of tools on the website, for example, customers can now compare their height to the size of the product with a technology that we implemented on the detail page, and those ultimately result in lower return rates in each individual category, to be very clear on that. So I hope this was helping to clear up the last question. The first question I noted was regarding working capital and the way we use or if we use factoring, we currently only use factoring for the installment plans that we use as a payment option. And as documented in the prospectus, we use 2 factoring partners there and continue to work with them. The second question I noted was around working capital and the expectation on the efficiency with the growth. Obviously, we will continue to invest in our inventory and in our selection inventory, obviously, as a result of selection. But the efficiency from the new categories in terms of working capital is significantly more attractive because the supply chain is significantly faster than for handbags and shoes for an example. So overall, I feel very comfortable with the working capital ratio that we're presenting here. And the return rate comment on COVID, obviously, I can't comment on other companies. What we are seeing is -- and this could be driven by our high average order value, which usually is higher than most other e-commerce companies. So we don't believe that there's a COVID impact on the development of our return rate.

All right. Then just a quick question on the size of the factoring program. So how much was that you factored out of those installment plans?

So the factoring share of installment plans is about 80% of the total installment plan value.

And the next question is from [indiscernible] Capital.

Just on the purchasing price, so you mentioned this low double digit. Is there any reason why you can't be more concrete? Can you give us a bit of a closer number? And then second question is on competition. You mentioned that in some products, there were more competition. You can elaborate or tell the reasons? Or do you see forward as well? Or do you see an improvement again?

Sure. Thank you for your questions. Purchasing price. What I can tell you is, again, the commitment we made in the prospectus to use about 45% to 50% of our IPO proceeds for M&A still holds up with the acquisition. If you look at the prospectus, the gross IPO proceeds are about EUR 38 million. In the adjustment slide that I show, we referred to about EUR 3 million of IPO-related costs, which ultimately brings down the IPO net proceeds to EUR 35 million. If you then think about the answer of 45% to 50% of the proceeds to be used for M&A and my comment of being fully in line with that commitment, you can calculate the purchase price a little bit better, but I will not make any comments on the details of the purchase price. Regarding the competition, your second question -- sorry, was there a follow-up?

No, that helps a lot.

The second question regarding competition in pricing. Obviously, the products that I mentioned before, sunglasses, watches and jewelry, are more price sensitive than handbags and other categories. I strongly believe in an upside in the gross margin in the midterm. It's obviously also driven by the lengthy lockdown, shutdown, whatever you want to call the current situation caused by COVID. The closures of the offline store. The inventory pressure that some retailers might have. Overall, what we're seeing is just more pressure on price when we look at the data points we're collecting in the whole market segment through different ways of doing that.

Okay. But you don't see it on the handbags or there as well?

No, I don't see a dilution of the gross margin in handbags. Therefore, the pressure on overall gross margin is coming from the new, more competitively priced products driven by the market segment pricing.

[Operator Instructions] And we haven't received any further questions at this point.

Perfect. Let's wait for 30 seconds, if any more questions come up. Otherwise, I thank you very much for your time. Looking forward to speaking to you soon, and wish you all the best for today, and a nice weekend.